'We are headed for a serious shock to the system', says bridging lender in response to house price surge

Annual house price growth has risen to 13.4%, the highest level since November 2004.

Nationwide’s latest House Price Index for June registered an average house price of £245,432 — slightly higher than the previous month (£242,832).

Regional data for Q2 indicated that all parts of the UK saw an acceleration in annual house price growth, with Northern Ireland and Wales reporting the largest gains at 14% and 13.4% respectively.

By contrast, Scotland saw the weakest rate of annual growth at 7.1%, closely followed by London at 7.3%.

“Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows — in fact, on this measure, affordability remains broadly in line with its long-run average,” said Robert Gardner, chief economist at Nationwide.

“However, house prices are close to a record high relative to average incomes; this is important because it makes it even harder for prospective first-time buyers to raise a deposit. 

“For example, a 10% deposit is over 50% of typical first-time buyer’s income. 

“A potential buyer earning the average wage and saving 15% of take-home pay would now take five years to raise a 10% deposit.”

Industry responds to house price surge

Guy Harrington, CEO at Glenhawk, anticipates that the economic backdrop and the end of government support schemes will likely lead to a correction.

“In some rural hotspots, houses are selling for 40% over the asking price,” he said.

“The UK housing market has a rocket attached that is burning low on fuel and, once this perfect storm passes, we are headed for a serious shock to the system.”

Nicky Stevenson, managing director at national estate agent group Fine & Country, added: “The housing market continues to see an unconstrained rally which may well be going into overdrive as the economy continues to unlock.

“Annual house price growth of this magnitude is something no one thought they’d see, particularly with the stamp duty holiday now tapering out.

“The market is shifting away from short-term factors to long-term trends caused by the pandemic, which at first were totally underestimated in their influence and staying power.

“If the hunger for larger properties represents a permanent shift and never reverts to its pre-pandemic norms, then a much-heralded snapping back of prices is going to prove rather elusive later this year.”

James Bloom, director at Alternative Bridging Corporation, is of the view that pipeline enquiries suggest the high demand for property is likely to continue beyond the stamp duty holiday deadline.

"Given the level of activity in the market, it's perhaps unsurprising that house prices have risen as strongly as they have.

“In this competitive environment, there is even greater onus on brokers to wisely select the lenders they work with to ensure they can be confident in the level of service they need to put their clients in the strongest possible position."

Alan Cleary, group managing director of mortgages at OSB Group, also believes the market will likely see a further period of robust housing market activity, as a result of low borrowing costs and the easing of criteria conditions.

“With the stamp duty holiday starting to phase out this week, it will be interesting to see whether prices continue to rise as supply is still limited due to the uncertainty that we are all trying to navigate around,” he added.

Tomer Aboody, director at MT Finance, stated that the government should be looking at how to release further properties to the market by reducing or removing stamp duty for downsizers. 

“The stamp duty holiday has helped first-time buyers and those moving up the ladder alike; now we need some assistance for those wanting to downsize and move into smaller properties — in turn, freeing up larger family homes and helping keep a lid on prices.”

Tobi Mancuso, director of property investment company Track Capital, commented: “The housing market is like the Wild West at the moment, and properties are flying off the shelves whether they’re good, bad or ugly. 

“A scarcity of properties and the stamp duty holiday has created a situation where buyers feel like they’re in the last-chance saloon, creating panic buying and pushing up asking prices.

“If you’re thinking of buying at the moment, it’s worth getting expert advice to make sure you’re not paying over the odds.”

Doug Miller, director at mortgage broker, Lansdown Financial Services, highlighted that many conveyancing firms have unfortunately been “like rabbits in the headlights” in recent months, adding that some buyers may miss the stamp duty deadline.

“People's ongoing mission for more rooms and outdoor space, while being able to avoid the dreaded daily commute, will push the boundaries of the property market into unchartered territory in the coming months.”

Leave a comment